New ways of making money have often generated new approaches to giving it away. With cryptocurrencies now worth more than all the U.S. dollars in circulation, holders face a crucial question: what kind of donors do they want to be?
The rise of cryptocurrencies has forced the finance industry and the world at large to re-examine assumptions on transparency, efficiency and power distribution. And so, crypto donors have an exciting opportunity to not only grapple with the decision of “how much” but also “how.” How, in other words, can they add both to the pool of available resources and ensure it’s better spent?
Joe Huston is Managing Director at GiveDirectly, an organization devoted to delivering unconditional digital funds to the poorest people in the world.
For better or worse, new sources of wealth often change how philanthropy works. John D. Rockefeller, America’s first billionaire, built its first modern foundation. Rockefeller had more money than he could give away himself and set up an entity to give according to a broad mandate long after his death. His peers – Carnegie, Mellon, Ford – soon followed and a new philanthropic tool was born.
Decades later, the personal computing revolution spurred Bill & Melinda Gates to position their foundation as a uniquely influential private player in the public health space. And in the years that followed, wealth from internet companies like Facebook drove the growth of effective altruism (or evidence-based philanthropy), as well as the expanded use of new legal structures like donor-advised funds or L.L.C.s.
Crypto donors have already begun to make their mark. In 2018, a person (or persons) calling themselves Pine gave 5,104 bitcoin to 60 charities entirely anonymously. FTX is the world’s only trading platform, crypto or otherwise, that was founded explicitly, “with the goal of donating to the world’s most effective charities.” It donates 1% of its net fees (in 2020, its founder was baffled to find himself then-candidate Joe Biden’s second largest donor).
New structures for giving have also developed. GitCoin uses quadratic funding to crowdsource and match funding for public goods in the Ethereum space. And nonprofit Noora Health issued an NFT promising the purchaser a digital claim to the impact achieved through the NFT’s purchase price.
This is just the beginning. In a conversation with economist Tyler Cowen, Coinbase CEO Brian Armstrong said if Bitcoin’s price reaches $200,000, half of the world’s billionaires would be crypto billionaires.
So how can crypto donors do the most good? First, they can join pioneers like Open Philanthropy Project in helping make altruism more effective. Too much giving still turns on anecdotes versus data. And more of those controlling the purse strings must ask the difficult questions about evidence and impact.
As the Managing Director of a nonprofit called GiveDirectly, I believe charities have much to learn from the transparency, efficiency, and decentralized power at the heart of crypto’s potential. The status quo aid model requires donor money to move through a complex web of multinational and local organizations before reaching its end-destination. Both dollars and information are often eroded along the way, and the end-user is too often deemed a passive recipient of goods or services, instead of an active agent of resource allocation.
One alternative is to simply give people money. At GiveDirectly, we have delivered over $380 million to hundreds of thousands of people, including residents in urban slums, refugees, and survivors of natural disasters across 10 countries. Direct cash transfers are not a silver bullet, but they’re evidence-backed, efficient, and have been increasingly adopted as an industry benchmark.
Cutting out the middlemen in aid has resonated within the crypto community. People like Jack Dorsey, Elon Musk, Vitalik Buterin have joined Pine and thousands of others in sending more than $25 million in cryptocurrencies to people in need through GiveDirectly. Cryptocurrencies or blockchain technology broadly could also help improve the implementation of giving itself better. Smart contracts could implement new approaches to results-based financing, public ledgers could open up new standards in transparent aid, or digital currencies could offer ways to distribute aid despite capital controls or inadequate fiat currencies. Of course, realizing these possibilities will require building with the world’s poorest people in mind (and investing more in those who are already doing so).
While crypto donors have important decisions to make about how and where to give, the work begins further upstream within the industry itself. As Teddy Roosevelt remarked about the industrialists’ new foundations, “No amount of charities in spending such fortunes can compensate in any way for the misconduct in acquiring them.” For cryptocurrency, that may mean tackling carbon footprints, rooting out the scams that prey on its most vulnerable community members, collaborating productively with regulators and tax authorities, or ensuring tomorrow’s financial system includes more diverse perspectives than today’s.
Still, if the giving often looks like the earning, there’s a lot to be hopeful about in the rise of crypto-philanthropy. Let’s make sure it delivers on that potential.